Dairy Exports Continued Bright Spot

U.S. dairy products leaving U.S. shores are on an unprecedented roll. Since the spring of 2010—an uncanny 28 months—exports have averaged between 12% and 15% of U.S. milk production.

That continued, and sustained volume, has helped buoy milk prices. Even now, with milk-cost margins squeezed, exports are a key reason prices are in the $18 to $20/cwt range for most of the country.

"Year-to-date, 13.5% of our milk production has been exported," says Alan Levitt, vice president of communications for the U.S. Dairy Export Council (USDEC). "That means that nearly one in seven tankers of milk service the export market."

Last year, he says, milk powder sales exceeded $1 billion in value, and will likely do so again. And for the first time, cheese export sales will reach $1 billion in value over the past 12 months. "Increased cheese sales have been the biggest difference in our product mix of exports," says Levitt. Through the first seven months of 2012—the latest data that is available—cheese exports accounted for 5.7% of U.S. cheese production.

One of the key reasons for this continued and sustained output is that U.S. dairy companies are maturing in their attitude toward the export market. No longer are exports viewed as a dumping ground for surplus commodities but as a full-value market that needs to be serviced with as much vigor as domestic markets.

USDEC is also maturing, says Levitt, by helping U.S. companies recognize what international markets require. An example is whole milk powder, which has never been produced here. Dairy Farmers of America, Darigold and Michigan Milk Producers are all in the process of building or converting plants to produce whole milk powder for the international market. These plants should be on-line by mid- to late 2013.

One of the fears as U.S. milk production slows, however, is that prices will rise too fast to sustain the appetite for U.S. products overseas. But Levitt points out that milk production is slowing across the globe, driven by higher feed costs everywhere. So far, prices haven’t risen too high or too quickly to choke off demand.

No one is saying that can’t happen—eventually. But so far, consumers in China, Indonesia, Vietnam and a whole host of other importing nations are willing to pay these higher prices.